Buying Into Univision Might Be Muy Bueno for Liberty's John Malone

John Malone, center, and Salma Hayek and Eugenio Derbez of 'How to Be a Latin Lover'

The aggressive investor could be looking to supercharge efforts by his companies to provide Spanish-language content to an underserved domestic market that is 60 million strong and growing.

Two years ago, John Malone famously said that he was looking for consolidation of "free radicals" in the content industry. The Liberty Media mogul's goal was to more effectively deal with merged pay TV giants, a trend in which he has played a key role, and move beyond the traditional pay TV bundle. He proposed, for example, that Lionsgate, in which Liberty held a small stake, could buy Starz, in which he owned a big stake. That deal came together last year.

Now there has been talk that the 76-year-old mogul has had conversations with owners of Spanish-language media powerhouse Univision Communications about buying a stake of unspecified but significant size through one of his companies. "Que demonios?" you may ask. What the hell is Malone up to?

While there was reportedly a big gap between the parties' valuations for Univision, a deal would be in line with Malone's pattern of striking when opportunity presents itself. After all, he has been called a "swamp alligator" for his ability to patiently lie in wait until an attractive deal presents itself at reasonable terms. Univision has long delayed a planned initial public offering amid volatile markets and media investors' concerns about cord-cutting. The company is understood to be continuing to eye a possible IPO, but a sale of a stake could also allow its owners to take some money off the table.

Spanish-language media companies Univision and Telemundo, owned by NBCUniversal, have long been seen as attractive businesses with more upside given the growth of the Hispanic population in the U.S. and its buying power. That opportunity and the fact that Univision has remained one of the rare independent content companies in the U.S. has made it an attractive investment target.

"Univision is easily one of the most desirable assets for media companies that might be looking to capitalize on relatively favorable demographic changes within the U.S. Hispanic population," CFRA media analyst Tuna Amobi tells THR. "Conceivably, such potential beneficiaries might include any and/or all" Malone companies.

Importantly, a Univision deal could help Malone's various companies accelerate and deepen their initiatives to get a bigger piece of the U.S. market of an estimated 60 million people who speak Spanish or are bilingual.

"Some of those companies in recent years have already implemented some of their own targeted Hispanic initiatives (and/or partnerships and investments) towards that goal — to varying degrees of success within that demographic segment," writes Amobi in an email. "However, an acquisition of the preeminent Spanish-language media company itself could be a potential game changer — in terms of sheer scale and dominance within that market."

Even buying a stake and having a say in the boardroom could benefit various companies in Malone's universe, which includes Discovery Communications, Lionsgate (which now owns Starz), Sirius XM, Charter Communications and, of course, Liberty Global.

"In the case of Malone, he would certainly be able to synergize content between Univision, Lionsgate and Starz," says Christopher Ali, who teaches media studies at the University of Virginia.

Indeed, Malone already has a number of synergies in place that would only be strengthened by a Univision stake. Take Lionsgate's Spanish-language business, for example. The studio runs Pantelion Films as a joint venture with Mexican broadcaster Televisa, which owns a stake in Univision and is a key programming supplier for it.

The venture, which on its website calls itself "the first major Latino Hollywood studio and the new face of Hispanic entertainment," has produced and acquired movies that speak to Hispanics. One of its biggest successes to date came in 2013 with Instructions Not Included, which took in $44.4 million, making it the top-grossing Spanish-language film of all time in the U.S. Director-star Eugenio Derbez, a superstar in Mexico, recently reupped his first-look agreement with Pantelion, and his April release How to Be a Latin Lover, co-starring Salma Hayek, took in $61 million globally, with a little over half that coming domestically.

A Malone deal could see Univision talent and resources shared with the film venture, allowing stars like Derbez from the film side to move to TV and vice versa. Cross-promotions of movies and shows would also be a natural result.

In addition, Lionsgate and Univision in September 2016 unveiled plans for a Spanish-language SVOD movie service, newly-launched on Aug. 1 as Pantaya. Hemisphere Media Group, which runs five U.S. Hispanic channels and two Latin American pay TV networks, also joined the service as an investor.

Univision is a marketing partner for Pantaya, supplying movies from its catalog, and not an investor. Pantaya offers Spanish-language movies from Televisa and Pantelion Films, plus Lionsgate films from the studio's 16,000-title library and other catalogs dubbed into Spanish. Bringing Univision under the Malone roof like Lionsgate could help further align interests and efforts behind the service.

Premium TV outlet Starz, now owned by Lionsgate, is also increasingly targeting Hispanics. "We have really worked on serving underserved audiences" with originals, namely women and African-Americans, Starz COO Jeffrey Hirsch recently told THR. "In the next 12 to 24 months, you'll start to see us add a third segment, Hispanic audiences."

In early July, Starz unveiled plans to beef up other Spanish-language programming as well. The Starz app, whose stand-alone subscription streaming service costs $8.99 per month, is expected to offer more than 700 Spanish-language content items by year's end and is in the process of adding Spanish-language movies like Pedro Almodovar's I'm So Excited, as well as telenovelas and kids series. Starz has three projects in development aimed at Hispanic viewers: Maleficio, an hour-long drama from Starz and Televisa USA; Pour Vida, a half-hour dramedy; and Santeria, a supernatural drama about two undercover agents who investigate a bizarre murder.

Satellite radio giant Sirius XM Radio, of which Malone's Liberty Media owns 68 percent, could also be a beneficiary of a Univision deal, according to Amobi. Univision's radio unit and the satellite radio firm, which has more than 32 million subscribers, could share or partner on content, for example, one observer suggests.

Then there's Malone's international cable operator Liberty Global, which could look to work with Univision and leverage its content. Liberty Global's Latin American arm last year grew via the nearly $7 billion acquisition of Cable & Wireless, which is active in Panama and the Caribbean and boasts around 6 million subscribers. The company also operates in growing markets like Chile and Puerto Rico.

"You can see connections being made there," Macquarie analyst Amy Yong says. "The idea of combining distribution platforms with content is incredibly attractive."

Yet another connection is Lionsgate's long-standing programming and distribution ties to Mexican broadcaster Grupo Televisa. These include Lionsgate CEO Jon Feltheimer having a seat on the Mexican media behemoth's board. Televisa, which recently got FCC approval to increase its Univision ownership stake to 49 percent, is supplying Univision with much of its programming, including Mexican-made telenovelas, and has been working more closely with the company to target the U.S. market.

If Malone acquires a portion of Univision and a new tie-in with Lionsgate results, Ali wonders whether that will spawn more original content targeted at the Hispanic community, or whether Lionsgate films will mostly be dubbed into Spanish. "The former would be desirable, but the latter would certainly be more economical," Ali says.

Whether a deal will ever be struck or not, Ali also highlights that a possible Malone stake in Univision would continue the industry consolidation the mogul has consistently promoted. The news of Malone eyeing Univision comes at the same time Discovery Communications has reportedly pursued Scripps Networks Interactive (Viacom was also interested in Scripps but recently dropped out).

"Potential interest in Scripps by Discovery means complementary and scale ambitions remain important in the changing media landscape and that Malone continues to play a major, far-flung role," Barrington Research analyst Jim Goss said in a recent report. "More to come? Wouldn't be a surprise."